‘Neobank’ 86 400 receives full banking licence

Mobile-first ‘neobank’ 86 400 expects to have its iOS and Android apps available within a matter of weeks, after the Australian Prudential Regulation Authority (APRA) granted it a full banking licence.

86 400 (the name refers the number of seconds in a day) is an initiative of payments processor Cuscal. Although well known in the financial services sector, 86 400 CEO Robert Bell said that Cuscal is far from being a household name among consumers.

However, it has a strong record when it comes to payment technology, Bell told Computerworld: The chief executive of the newly minted bank said that Cuscal had been a key contributor to the New Payments Platform (NPP) and was a pioneer when it came to NFC payments via smartphone, for example.

“Cuscal clearly saw what was happening overseas with digital banking and saw the opportunity to do something in Australia,” Bell said. The payments processor contemplated building on some of the overseas digital banks for its Australian initiative, but in the end decided that none of the models was quite right for the local market, the CEO said.

“So we set on the journey of building our own digital bank,” Bell said. “We're leveraging the connectivity and payments capability of Cuscal, but we set up a separate company, separate board in separate offices to build a digital bank from scratch, which is pretty exciting and a pretty rare opportunity to do it that way.”

86 400’s staff have already been employing its services via the bank’s app for over six months.

Bell said that the 86 400 had opted not to follow the route of fellow neobanks Xinja and Volt in initially seeking a new restricted authorised deposit-taking institution (ADI) licence from APRA. Instead from the outset it applied for a full ADI licence.

“We skipped past the restricted licence and applied for a full licence from day one,” he said.

A limited ADI licence “really allows someone to set up sort of a sandbox to kind of demonstrate you've got some capability to attract investors,” Bell said. “We are fully funded by Cuscal, so we don't have that challenge at the moment,” he said in an interview with Computerworld ahead of today’s announcement

“We already had all the connectivity we needed, so we didn't need to test and demonstrate that.”

A restricted ADI “is kind of useful for much smaller, less-resourced startups, but it wasn't necessary for us,” he said.

Digital-first

86 400 is a “digital-first” bank, the CEO said, and is not hindered by the legacy of more established banks. “You've got 40-year-old core banking systems — they're built things on top of things, on top of things, on top of things,” he said. “And what you can do in Internet banking is a small fraction of what someone can do via a branch.”

Australian banks have “done quite well relatively to overseas markets” when it comes to mobile, he said, “but no one’s actually designed an app or a banking experience for mobile-first.”

“What you can expect from us is things will be a bit different,” the CEO said. Key to 86 400’s appeal will be a product “that helps customers out, not catches them out.”

He gave an example of bonus interest on a savings account: “Typically, the way that normally works is that Bank A will advertise a rate, and then you have to sort of stand on your left leg, spin around three times, rub your nose. And if you’re facing the wind in the right direction, you'll actually get that bonus interest rate.

“In other words, it's designed really for you not to get it. There are so many criteria.”

With 86 400, by contrast, there will be simple criteria and it will use its mobile platform to help remind customers if they haven’t met them, he said. Customers will be able to sign up for an account via the app in just a couple of minutes, Bell said.

From “day one” 86 400 will have a fully functional transaction account supporting mobile payment platforms including Apple Pay, Samsung Pay and Google Pay, he said, with the bank’s customers able to make real-time payments thanks to the NPP.

“We haven’t seen an example of a new bank that's launched with all those features,” the CEO said. “Typically, they will launch with a prepaid card and pretty limited functionality.”

The bank will also launch with a savings account product, and it expects to launch a home loan product in the near future.

Although it aims to differentiate itself from Australia’s established banks, Bell emphasised that 86 400’s customers will have the same government protections that customers of any bank does, including the guarantee on deposits up to $250,000.

“We'll have been through the exact same process that a large bank goes through in terms of regulatory approvals,” he said. “And actually, I would argue we've been looked at harder because every kind of stone's been turned over.”